Entries in FDIC (13)


Wells Fargo Fires Employee for False Dime Crime in 1963

Scott Eells/Bloomberg via Getty Images(DES MOINES) -- In 1963 a 19-year-old Richard Eggers committed a crime, putting a fake dime into a laundry machine in Carlisle, Iowa.  Eggers was spotted by the local sheriff and was convicted of operating a coin-changing machine by false means. He was sentenced to 15 days in jail, of which he served two. He was released early to return to college, and fined $50. Case closed.

Well, not so much. Now, 49 years later, Eggers’ past offense is coming back to haunt him.

Eggers worked as a customer service representative at Wells Fargo Home Mortgage in Des Moines until he was fired in July.  The reason given for his dismissal: the long-ago incident with the dime.

“We understand the outpouring of concern for Mr. Eggers and we want people to know that we take this matter very seriously,” the company said in a statement. “Wells Fargo is an insured depository institution, a global bank, bound by U.S. Federal law (Section 19 of the Federal Deposit Insurance Act) to protect our customers and their personal financial information from someone who we know has committed an act of dishonesty or breach of trust -- regardless of when the incidents occurred. It is uncomfortable, but it is a law that we have to follow. We have the responsibility to avoid hiring or continuing to employ someone who we know has a criminal record.”

Mr. Eggers’ lawyer, Leonard Bates, spoke with ABC News, disagreeing with the company’s decision. “In 1963 Mr. Eggers was young he did something stupid. He put a wood dime in laundry machine,” he said.  “The spirit of the law was to prevent widespread mortgage fraud but does not apply to my client, who is a customer service representative.”

Mr. Bates did not lay all the blame on the company. “The FDIC’s regulation is overly broad,” Bates said, adding, “There are better, less harsh ways that Wells Fargo could do this without turning people’s lives upside down.”

Wells Fargo says it did everything in its power to keep Eggers working and in compliance with the law.

“When we found out about Mr. Eggers situation we began working with him immediately to help him learn about steps that he could take to make him eligible for reemployment at a financial institution. Specifically, he and any other workers in this situation can apply to the FDIC for written permission to work at a financial institution despite the existence of the disqualifying conviction,” Wells Fargo said in its statement.

The waiver process can take roughly six months and does not always result in reemployment. “Wells Fargo is touting the fact that employees can get waivers,” Bates said. “Some of my clients have obtained waivers but Wells Fargo has not yet hired them back.”

There is a faster, automatic waiver process, however.  In order to qualify the waiver-seeker must have committed a crime more than 10 years ago, received a sentence of less than 365 days, received a fine of less than $1,000, and served no actual jail time. Because Mr. Eggers spent two days in jail in 1963, he does not qualify for the automatic waiver.

Copyright 2012 ABC News Radio


FDIC Seeks to End ‘Too Big to Fail’ Bailouts

STAN HONDA/AFP/Getty Images(WASHINGTON) -- The U.S. government has launched a plan to deal with large failed companies that could touch off another Lehman-like disaster, hoping to prevent instability in the financial markets.

The Federal Deposit Insurance Corporation’s (FDIC) acting chairman Martin Gruenberg on Thursday outlined steps that the federal financial agency will take to allow the subsidiaries of a failed financial institution to operate while taking over a parent company -- without a taxpayer bailout in accordance with the Dodd-Frank Act.

In the event of a failing or failed institution, Gruenberg said the FDIC’s resolution strategy has three key goals.

“The first is financial stability, ensuring that the failure of the firm does not place the financial system itself at risk,” Gruenberg said in his prepared remarks in Chicago at the Federal Reserve Bank of Chicago’s Bank Structure Conference. “The second is accountability, ensuring that the investors in the failed firm bear the firm’s losses.”

James Chessen, chief economist with the American Bankers Association, said Gruenberg and the FDIC sent an “important” message to investors that there is an agency prepared to deal with a troubled, systemically important institution so disruptions will be minimal but investors will take losses.

“I think it’s clearly a message that says that if you’re expecting the government to protect your investment in a large financial firm, you should readjust your thinking,” Chessen said. “The plan is not to protect you and you should take care in really analyzing the risk of your investment.”

The third goal of the FDIC’s strategy is “viability” by converting the failed firm through a “receivership process,” similar to the manner in which the FDIC converts a failed, federally insured depository institution to another working bank.

The FDIC’s new strategy deals directly with these large financial companies, or “systematically important financial institutions” (SIFI), which critics describe as “too big to fail.” Those include a number of the rescued companies during the recent recession, like American International Group Inc. The U.S. government rescued AIG in 2008 with $125 billion in taxpayer money, and this week the Government Accountability Office released an estimate that the government could make a profit of $15.1 billion from the bailout.

The Group of 20′s enforcement agency, the Financial Services Board, published a list of about 30 SIFIs in November, which include eight American companies. Those banks face a number of requirements, including submitting a plan by the end of 2012 detailing how their businesses should be spun off if they collapse.

“By definition, these are institutions whose failure could, if not handled effectively, have ripple effects in the economy,” Chessen said. "The goal is to understand how you would resolve that.”

Copyright 2012 ABC News Radio


Bank Lending Rises by Largest Amount in Four Years

Nick M Do/Getty Images(NEW YORK) -- In a sign that the U.S. economy is taking a turn for the better, banks are lending more.

According to a new Federal Deposit Insurance Corporation (FDIC) report, American bank lending during the last quarter of 2011 rose by the largest amount in four years.  The survey also confirms other reports of increased lending by banks.

The FDIC says the banking industry posted a $119 billion profit for 2011 -- up 40 percent from the previous year and the largest profit since 2006, when employment and the economy was stronger than it is now.

Much of the lending growth comes from regional banks.

Copyright 2012 ABC News Radio


Volcker Rule Unveiled: May Slash Wall Street Bonuses

iStockphoto/Thinkstock(WASHINGTON) -- The government’s biggest financial heavyweights released a long-awaited version of the financial regulation known as the Volcker Rule, which may regulate “high-risk” trading more closely and lead to smaller Wall Street traders’ bonuses.

The Treasury Department, Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Securities Exchange Commission (SEC) on Tuesday released the 200-plus page proposal. The FDIC allows the public to comment about the rule by Jan. 13.

The proposed Volcker rule, named after former Federal Reserve chairman Paul Volcker, is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law in July 2010. The rule prohibits two activities among insured depository institutions -- any bank or credit union that is federally insured and accepts deposits, and that includes traditional banks as well as Goldman Sachs, Morgan Stanley, and American Express.

First, it prohibits those financial companies from engaging in “short-term proprietary trading of any security, derivatives, and certain other financial instruments” from an entity’s own funds. Second, it “prohibits owning, sponsoring, or having certain relationships with, a hedge fund or private equity fund.”

The rule would require banks to establish an “internal compliance program” and banks with “significant trading operations” to report to federal agencies. The rule is subject to exemptions, which financial watchdogs say are not stringent enough, and banks say are too complex.

The Treasury said the rule details whether a nonbank financial company should be subject to “enhanced supervision” to prevent a future financial crisis. In the recent financial crisis, financial distress at certain nonbank financial companies contributed to, “a broad seizing up of financial markets,” according to the council.

Under the proposed rule, traders’ bonuses could see a cut if they are paid based on revenue from fees, commissions, bid/ask spreads and not the appreciation or profit from their hedged positions.

Frank Keating, president of the American Bankers Association, said he feared the “complexity” of the rule will require bank employees whose sole jobs are to comply with the rule, further inhibiting “U.S. banks’ ability to serve customers and compete internationally.”

Keating said regulators estimate banks will spend nearly 6.6 million hours to implement the rule, or which 1.8 million hours would be required every year.

“That translates into 3,292 years, or more than 3,000 bank employees whose sole job will be complying with this rule,” he said in a statement. “They will be transferred to a role that provides no customer service, generates zero revenue and does nothing for the economy."

Copyright 2011 ABC News Radio


Bank Failures Decline, But Economists Still Cautious

iStockphoto/Thinkstock(WASHINGTON) -- The Federal Deposit Insurance Corporation (FDIC) announced its 73rd bank closure this year, pacing well behind the gargantuan number of 157 total bank closures in 2010.

But while domestic banks are still reeling from the 2008 financial crisis, concerns grow in the U.S. about banks’ exposure to the Greek and European debt crisis.

On Friday, the FDIC announced the two most recent bank closures:  Citizens Bank of Northern California in Nevada City, Calif., and Bank of the Commonwealth in Norfolk, Va.

Greg Hernandez, FDIC spokesman, said the 73 closures so far pale in comparison to the 157 closures in 2010. He said at about this time last year, there were 127 bank failures.

“We certainly have slowed down,” he said. “The FDIC has looked at 2010 as the turning point of bank failures.”

In 2009, there were 140 bank closures and in 2008 there were 25. There were only three bank closures in 2007, according to the FDIC.

Gary Shilling, president of economic consulting firm A. Gary Shilling and Co., said the banks that are still closing are a result of the “very questionable loans” before the financial crisis. Many of those loans were connected to sub-prime residential mortgages, and when those defaulted, banks had to take a write-down and didn’t have enough capital to proceed with business as usual.

Shilling cautioned that while he does not expect the same depth of bank failures as last year, he said there could be further declines because of other economic problems such as bank exposure to the European debt crisis. In July, Shilling was one of the first economists to publicly forecast a recession next year.

“Banks are intertwined globally,” he said. “Although the smaller banks, which are usually the most vulnerable, probably don’t have a lot of international operations.”

Of concern is also the decline of real estate prices and its effect on commercial real estate loans from small and medium banks, Shilling said.

Hernandez said when FDIC-insured banks fail, the agency, as receiver, tries to smooth the process for depositors. In the majority of cases, a failed bank is acquired by another bank, so services to the community are the same, but under a new name.

In 2009 and 2010, the FDIC opened three temporary satellite offices in Irvine, Calif., Jacksonville, Fl., and near Chicago to assist with the overwhelming number of bank closures.

But two of the three satellite offices will be closing ahead of schedule. The FDIC announced on Sept. 14 that it will be closing its temporary Midwest satellite office because the bank failures in that region are decreasing.

Earlier this year, the FDIC announced that its West Coast office would close on Jan. 13 next year because of a “declining workload.” The FDIC said it expects its temporary Jacksonville office to remain open until at least the fourth quarter of 2013 because of the “substantial work remaining in that office from the large number of bank failures that have occurred in the Southeastern U.S.”

Copyright 2011 ABC News Radio


Regulators Shut Down Three US Banks

ABC News(WASHINGTON) -- U.S. regulators shut down three national banks on Friday.

In Florida, Southshore Community Bank and LandMark Bank of Florida were purchased by the American Momentum Bank, according to the Federal Deposit Insurance Corporation.

In Colorado, Bank of Choice was closed by the Colorado Division of Banking. The Greeley, Colo., based bank will be taken over by Bank Midwest.

The total number of bank foreclosures in 2011 so far number 58.

Copyright 2011 ABC News Radio


Georgia Leading the US with 14 Bank Closures in 2011

ABC News(CLAYTON, Ga.) -- The Federal Deposit Insurance Corporation said Friday that financial authorities closed Mountain Heritage Bank in Clayton, Ga.  This is the 48th bank to fail this year and the 14th in Georgia, making that state the nation's leader in failed banks.  Since 2008, Georgia has closed 65 banking institutions, the Atlanta Journal-Constitution reports.

The 48 banks seized so far in 2011 is still lower than that of the first have of 2010.  The Wall Street Journal reports that 157 banks had failed by the end of last year -- the highest since the end of the savings and loan crisis in 1992.

All deposit accounts at Mountain Heritage Bank, with the exception of certain brokered account deposits, are being transferred to First American Bank and Trust Co. in Athens, Ga. under a purchase-and-assumption deal with the FDIC, according to The Wall Street Journal.

Before the close, Mountain Heritage reportedly had $103.7 million in assets and $89.6 million in deposits between its two branches.  According to the FDIC, the bank's failure could end up costing the Deposit Insurance Fund about $41 million.

Copyright 2011 ABC News Radio


FDIC's Problem Bank List Increased, But Not By Much

Ryan McVay/Photodisc/Thinkstock(WASHINGTON) -- Every quarter the FDIC releases a report about the financial condition of the banks it insures and a count of the number of institutions it believes are at special risk -- a “Problem List.”
Tuesday’s Q1 Quarterly Banking Profile reports that there are 888 banks that are in questionable financial condition, just four more than the previous quarter. Those problem banks have total assets of $397 billion.
While the list is significant from a historic perspective -- there were just 90 problem institutions before the 2008 financial crisis -- it is heartening that the list isn’t growing at a healthy clip.
The report says that insured banks made profits of $29 billion during the first three months of the year. That’s the best quarterly earnings period since the financial crisis. But there was a drop in the institution’s revenues, only the second time in 27 years that the FDIC has seen top line revenue drop year over year.

Copyright 2011 ABC News Radio


FDIC Chairman Bair to Step Down July 8

FDIC(WASHINGTON, D.C.) -- The Federal Deposit Insurance Corporation announced Monday that Charmain Sheila Bair will step down from her post on July 8.

Bair's term officially ends on June 30, but she will stay on an extra week to vote on "living wills" in a board meeting. Living wills would require financial firms with upwards of $50 billion to report their debts, cash flows, and funding.

President Obama will need to appoint a new chairman of the FDIC, along with a new head of the Consumer Financial Protection Bureau. Bair has said that she plans to pen a book and make up for lost time with her family.

Copyright 2011 ABC News Radio


FDIC: 'Problem List' on the Rise to 884 Institutions

Photo Courtesy - ABC News(WASHINGTON) -- At a press conference Wednesday, the FDIC released its fourth quarter and year-end 2010 earnings report for FDIC-insured institutions. 

The FDIC reported 157 insured commercial banks and savings institutions failed in 2010, marking the largest annual number of bank failures since 1992 when the FDIC saw 182 failed institutions.  In the fourth quarter of 2010, the FDIC added 24 institutions to the “Problem List,” raising the number of institutions on the list to 884.

Despite this increase in troubled financial institutions, FDIC Chairman Sheila Bair called 2010 a “turnaround year” for the industry after it experienced four straight quarters of positive earnings. The full-year net income for banks tallied at $87.5 billion, the highest full-year earnings since 2007. 

“While earnings in 2010 remain well below pre-crisis levels, the past year marked a significant milestone on the road to recovery,” Bair said. 

The FDIC reported banks earned $21.7 billion in the fourth quarter of 2010, compared to a $1.8 billion net loss in the fourth quarter of 2009.

Revenue growth was consistent compared to previous years but remained sluggish due to a lack of “upward momentum.”  Net operating revenue in 2010 was $163.5 billion, only $2.8 billion higher than the previous year.

“A key reason why revenues haven’t grown faster is that loans have not been growing,” Bair said.

Bank lending decreased for the ninth time in 10 quarters.  Total loan and lease balances fell $13.6 billion in the final quarter of 2010 with lending in real estate construction and development, non-credit card consumer loans, and home equity lines of credit shrinking.  Banks cut loan-loss provisions by $31.6 billion in the fourth quarter.

Copyright 2011 ABC News Radio

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